**U.S. Office Inventory Declines Thanks to Conversions and Demolitions**
Office space conversions have long been proposed as a solution to address the growing number of vacant commercial properties. Now, new data suggests that these efforts are making a significant impact on the U.S. office market.
According to a recent CBRE report titled *Conversions & Demolitions Reducing U.S. Office Supply*, adaptations and demolitions are expected to surpass new office space deliveries in 2025. This development is viewed as a positive step toward reducing record-high office space availability and supporting the sector’s ongoing recovery.
CBRE analyzed 58 markets across the country and found that 23.3 million square feet of office space is slated for conversion or demolition. Of that total, roughly 12.8 million square feet will be converted to other uses, while 10.5 million square feet are set for demolition. Meanwhile, only 12.7 million square feet of new office supply are projected to enter the market in the same period.
The report highlights a growing trend that gained momentum over the past decade and accelerated significantly since the onset of the COVID-19 pandemic. Here’s how planned conversions are being repurposed:
– 76% for multifamily residential use
– 8% for hospitality
– 4% for industrial purposes
– 3% for life sciences
While conversions offer a promising solution, the report notes that this trend varies widely by market. Factors such as building values, inventory age, construction costs, and the availability of experienced developers all influence how office spaces are reused.
However, not all buildings are suitable for conversion. Properties built in the 1970s and 1980s with large floor plates are particularly challenging; these account for more than half of the demolitions but only 35% of the conversions.
CBRE analysts also cautioned that continued high interest rates, labor shortages, and increasing construction costs could pose challenges. As such, many developers may wait for a more favorable economic climate before beginning new conversion projects.
Despite these challenges, the current wave of conversions and demolitions is helping to reshape the office market, potentially creating more sustainable and diversified urban environments.
